Aurizon Holdings Limited (ASX:AZJ) is favoured by institutional owners who hold 60% of the company

Key Insights

• Institutions' substantial holdings in Aurizon Holdings implies that they have significant influence over the company's share price
• The top 15 shareholders own 50% of the company
• Recent purchases by insiders

Every investor in Aurizon Holdings Limited (ASX:AZJ) should be aware of the most powerful shareholder groups. The group holding the most number of shares in the company, around 60% to be precise, is institutions. In other words, the group stands to gain the most (or lose the most) from their investment into the company.

Given the vast amount of money and research capacities at their disposal, institutional ownership tends to carry a lot of weight, especially with individual investors. Therefore, a good portion of institutional money invested in the company is usually a huge vote of confidence on its future.

In the chart below, we zoom in on the different ownership groups of Aurizon Holdings.

View our latest analysis for Aurizon Holdings

What Does The Institutional Ownership Tell Us About Aurizon Holdings?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

Aurizon Holdings already has institutions on the share registry. Indeed, they own a respectable stake in the company. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. When multiple institutions own a stock, there's always a risk that they are in a 'crowded trade'. When such a trade goes wrong, multiple parties may compete to sell stock fast. This risk is higher in a company without a history of growth. You can see Aurizon Holdings' historic earnings and revenue below, but keep in mind there's always more to the story.

Since institutional investors own more than half the issued stock, the board will likely have to pay attention to their preferences. Aurizon Holdings is not owned by hedge funds. Mondrian Investment Partners Limited is currently the company's largest shareholder with 7.2% of shares outstanding. The second and third largest shareholders are L1 Capital Pty. Limited and The Vanguard Group, Inc., with an equal amount of shares to their name at 6.2%.

Looking at the shareholder registry, we can see that 50% of the ownership is controlled by the top 15 shareholders, meaning that no single shareholder has a majority interest in the ownership.

While studying institutional ownership for a company can add value to your research, it is also a good practice to research analyst recommendations to get a deeper understand of a stock's expected performance. There are a reasonable number of analysts covering the stock, so it might be useful to find out their aggregate view on the future.

Insider Ownership Of Aurizon Holdings

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Management ultimately answers to the board. However, it is not uncommon for managers to be executive board members, especially if they are a founder or the CEO.

Insider ownership is positive when it signals leadership are thinking like the true owners of the company. However, high insider ownership can also give immense power to a small group within the company. This can be negative in some circumstances.

Our data suggests that insiders own under 1% of Aurizon Holdings Limited in their own names. It's a big company, so even a small proportional interest can create alignment between the board and shareholders. In this case insiders own AU$14m worth of shares. It is always good to see at least some insider ownership, but it might be worth checking if those insiders have been selling.

General Public Ownership

The general public-- including retail investors -- own 40% stake in the company, and hence can't easily be ignored. This size of ownership, while considerable, may not be enough to change company policy if the decision is not in sync with other large shareholders.

Next Steps:

While it is well worth considering the different groups that own a company, there are other factors that are even more important. Consider for instance, the ever-present spectre of investment risk. We've identified 2 warning signs with Aurizon Holdings (at least 1 which is potentially serious) , and understanding them should be part of your investment process.

But ultimately it is the future, not the past, that will determine how well the owners of this business will do. Therefore we think it advisable to take a look at this free report showing whether analysts are predicting a brighter future.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.